Englobal Corp (ENG) 10-Q Quarterly Report November 2021

, a leading provider of innovative, project delivery solutions for the energy industry, today announced that, for the third quarter ended September 25, 2021, it reported net income of $2,401,000, or $.07 per share, on revenue of $5,921,000, compared with a net loss of $1,110,000, or $(.04) per share, on revenue of $15,729,000 for the third quarter ended September 26, 2020.

ENG’s $3.5 million improvement in third quarter bottom line performance compared to the same period last year was primarily the result of a Q3 2021 Other Income contribution of $6.4 million, consisting of a $5.0 million forgiveness of the company’s PPP loan obtained in April 2020 and a $1.4 million employee retention credit. Both of these items were used to cover payroll costs in order to maintain our essential workforce. The credits were partially offset by Q3 2021 decreases in revenue and gross margin, in addition to increased business development costs within the company’s Commercial segment, compared to Q3 last year.

The $9.8 million decrease in the company's third quarter revenue -- and $23.5 million decrease in nine-month revenue -- compared with the same periods last year were due primarily to the COVID-19-related non-renewal of several large commercial segment projects, as well as ongoing delays in certain government services projects due to COVID-19-related base closures and travel restrictions. These factors were partially offset by revenue contributed by one large project that did continue into the third quarter of 2021.

For the nine months ended September 25, 2021, the company had a net loss of $1,809,000, or $(.06) per share, on revenue of $29,449,000, compared with net income of $59,000, or $.00 per share, on revenue of $52,871,000 for the nine months ended September 26, 2020.

ENG’s $1.9 million decrease in nine month bottom line performance compared with the same period in 2020 was primarily a result of decreases in revenue and gross margin, in addition to increased business development costs and bad debt reserve within the company’s Commercial segment. These factors were partially offset by employee retention credits in the first and third quarters of 2021 and the PPP loan forgiveness.

"While it’s clear that ENG's business in the third quarter of 2021 was still being adversely affected by the lingering disruption of the energy industry from the effects of COVID-19,” said ENG CEO Mark A. Hess, “ENG is strongly positioned today to take advantage of the anticipated increase in business activity in our markets. First, we have recently added on-site construction to our suite of client services, a move we are confident will attract additional business that is expected to boost our revenue and earnings starting in this current quarter.

“Second, earlier this week we announced our partnering with a leading university to build a prototype CO2 sequestration reactor intended to capture the carbon dioxide formed during power generation and other industrial processes and storing it so that it is not released into the atmosphere. This project potentially provides us with yet another source of near and long-term revenue growth.

“Third, thanks to our recent stock offerings we have a strong balance sheet with nearly $25 million cash on hand and less than $1.4 million in long-term debt. This financial stability not only gives our current and prospective clients added comfort, but also provides ENG with far greater ability to execute on many of the opportunities before us, including those in the expanding renewables and green energy sectors.

"These opportunities, plus the continued energy industry recovery from the COVID pandemic, will, we believe, produce improved results for our company for the remainder of this year and into 2022," Mr. Hess concluded.

The following is a summary of the income statements for the three- and nine-month periods ended September 25, 2021 and September 26, 2020:

	For the Three Months Ended						For the Nine Months Ended
	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Revenue	$	5,921		$	15,729		$	29,449		$	52,871
Gross profit (loss)		(814	)		1,144			272			6,857
Selling, general and administrative expenses		3,089			2,174			9,914			6,621
Operating profit (loss)		(3,903	)		(1,030	)		(9,642	)		236
Net income (loss)		2,401			(1,110	)		(1,809	)		59

The following table illustrates the composition of the company's revenue and profitability for its operations for the three- and nine-month periods ended September 25, 2021 and September 26, 2020:

	Three Months Ended											Three Months Ended
(amounts in thousands)	September 25, 2021											September 26, 2020
Segment	Total Revenue		% of Total Revenue			Gross Profit (Loss) Margin			Operating Loss Margin			Total Revenue		% of Total Revenue			Gross Profit Margin			Operating Profit (Loss) Margin

Commercial	$	3,935		66.5	%		(27.7	)%		(66.7	)%	$	13,867		88.2	%		7.1	%		1.1	%
Government Services		1,986		33.5	%		13.8	%		(0.3	)%		1,862		11.8	%		8.5	%		(0.3	)%
Consolidated		5,921		100.0	%		(13.7	)%		(65.9	)%		15,729		100.0	%		7.3	%		(6.5	)%

	Nine Months Ended											Nine Months Ended
(amounts in thousands)	September 25, 2021											September 26, 2020
Segment	Total Revenue		% of Total Revenue			Gross Profit (Loss) Margin			Operating Profit (Loss) Margin			Total Revenue		% of Total Revenue			Gross Profit Margin			Operating Profit Margin

Commercial	$	23,141		78.6	%		(1.6	)%		(26.0	)%	$	45,180		85.5	%		12.7	%		7.2	%
Government Services		6,308		21.4	%		10.3	%		(0.5	)%		7,691		14.5	%		14.5	%		8.2	%
Consolidated		29,449		100.0	%		0.9	%		(32.7	)%		52,871		100.0	%		13.0	%		0.4	%

The following table presents certain balance sheet items as of September 25, 2021 and December 26, 2020:

(amounts in thousands)

As of

September 25,

2021

As of

December 26,

2020

Cash

24,699

13,706

Working capital

30,980

14,039

ENGlobal Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share data)

	For the Three Months Ended						For the Nine Months Ended
	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Operating revenues	$	5,921		$	15,729		$	29,449		$	52,871
Operating costs		6,735			14,585			29,177			46,014
Gross profit		(814	)		1,144			272			6,857

Selling, general and administrative expenses		3,089			2,174			9,914			6,621
Operating profit (loss)		(3,903	)		(1,030	)		(9,642	)		236

Other income (expense):
Other income, net		6,371			4			8,061			6
Interest expense, net		(46	)		(62	)		(161	)		(103	)
Income (loss) from operations before income taxes		2,422			(1,088	)		(1,742	)		139

Provision for federal and state income taxes		21			22			67			80

Net income (loss)		2,401			(1,110	)		(1,809	)		59

Basic and diluted income (loss) per common share:	$	0.07		$	(0.04	)	$	(0.06	)	$	0.00

Basic and diluted weighted average shares used in computing income (loss) per share:		35,159			27,507			30,776			27,529

ENGlobal Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except share and per share amounts)

	September 25, 2021			December 26, 2020
ASSETS
Current Assets:
Cash	$	24,699		$	13,706
Trade receivables, net of allowances of $1,673 and $386		5,310			7,789
Prepaid expenses and other current assets		217			891
Payroll taxes receivable		3,065			—
Contract assets		3,655			4,090
Total Current Assets		36,946			26,476
Property and equipment, net		1,117			1,263
Goodwill		720			720
Other assets
Right of use asset		3,179			1,628
Deposits and other assets		375			351
Total Other Assets		3,554			1,979
Total Assets	$	42,337		$	30,438

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable	$	1,439		$	2,138
Accrued compensation and benefits		1,963			3,048
Current portion of leases		1,126			1,541
Contract liabilities		664			1,258
Current portion of note		—			3,707
Current portion of deferred payroll tax		519			—
Other current liabilities		255			745
Total Current Liabilities		5,966			12,437

Deferred payroll tax		519			1,037
Long-term debt		1,377			2,733
Long-term leases		2,502			608
Total Liabilities		10,364			16,815
Commitments and Contingencies (Note 8)
Stockholders’ Equity:
Common stock - $0.001 par value; 75,000,000 shares authorized; 35,208,061 shares issued and outstanding at September 25, 2021 and 27,560,686 shares issued and outstanding at December 26, 2020		35			28
Additional paid-in capital		57,309			37,157
Accumulated deficit		(25,371	)		(23,562	)
Total Stockholders’ Equity		31,973			13,623
Total Liabilities and Stockholders’ Equity	$	42,337		$	30,438

ENGlobal Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(amounts in thousands)

	For the Nine Months Ended
	September 25, 2021			September 26, 2020
Cash Flows from Operating Activities:
Net income (loss)	$	(1,809	)	$	59
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization		355			313
Share-based compensation expense		166			177
Forgiveness of PPP Loan		(4,974	)		—
Changes in current assets and liabilities:
Trade accounts receivable		2,479			(1,268	)
Contract assets		435			807
Other current assets		(2,415	)		620
Accounts payable		(699	)		(177	)
Accrued compensation and benefits		(1,085	)		883
Contract liabilities		(594	)		(2,706	)
Income taxes payable		(32	)		(76	)
Other current liabilities, net		(458	)		(361	)
Net cash used in operating activities	$	(8,631	)	$	(1,729	)

Cash Flows from Investing Activities:
Property and equipment acquired		(187	)		(228	)
Net cash used in investing activities	$	(187	)	$	(228	)

Cash Flows from Financing Activities:
Issuance of common stock, net		19,993			—
Payments on finance leases		(94	)		(64	)
Proceeds from PPP loan		—			4,937
Interest on PPP loan		25			—
Proceeds (payments) from revolving credit facility		(113	)		1,476
Net cash provided by financing activities	$	19,811		$	6,349
Net change in cash		10,993			4,392
Cash at beginning of period		13,706			8,307
Cash at end of period	$	24,699		$	12,699

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	155		$	103
Right of use assets obtained in exchange for new operating lease liability	$	2,613		$	963
Cash paid during the period for income taxes (net of refunds)	$	151		$	16
Debt issuance costs	$	—		$	140
Leased assets obtained in exchange for new finance lease liabilities	$	—		$	219
Non-cash transaction: PPP loan forgiveness	$	4,974		$	—

For further information on ENG's third quarter 2021 financial results, please refer to its Form 10-Q filing on the company's website at www.englobal.com, or on the SEC's website at www.sec.gov.

Conference Call

Management will host a conference call at 9:00 am Eastern time today to discuss the company's third quarter 2021 financial results, provide updates on potential contract awards, and discuss the company's growth outlook for the remainder of 2021.

To participate in the conference call, please dial in five to ten minutes before the call: (Toll Free) 888-506-0062 domestically, or 973-528-0011 internationally.

Entry code: 220367

The conference call will also be broadcast live over the Internet and can be accessed at: https://www.webcaster4.com/Webcast/Page/2272/43346

The teleconference replay will be available shortly after the completion of the live event through 9:00 am Eastern time on November 11, 2021. You may access the replay by dialing (Toll Free) 877-481-4010 domestically, or 919-882-2331 internationally, and referencing conference ID 43346.

You may also access the replay by visiting the company's web site:

https://www.englobal.com/about-eng/events-and-presentations/

About ENG

ENGlobal (NASDAQ:ENG) is a leading provider of complete project solutions for renewable and traditional energy throughout the United States and internationally. ENGlobal operates through two business segments: Commercial and Government Services. The Commercial segment provides engineering, design, fabrication, construction and integration of automated control systems as a complete packaged solution for our clients. The Government Services segment provides engineering, design, installation, operations, and maintenance of various government, public sector, and international facilities, specializing in turnkey automation and instrumentation systems for the U.S. Defense industry worldwide. Further information about the Company and its businesses is available at www.ENGlobal.com.

Safe Harbor for Forward-Looking Statements

The statements above regarding the Company's expectations, including those relating to its future results, operations and certain other matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws and are subject to risks and uncertainties. For a discussion of risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ENGlobal's filings with the Securities and Exchange Commission, including the Company's most recent reports on Form 10-K and 10-Q, and other SEC filings.

Click here to join our email list: https://www.englobal.com/investors/

CONTACT:

Market Makers - Investor Relations

Jimmy Caplan

512-329-9505

Email: jimmycaplan@me.com

Market Makers - Media Relations

Rick Eisenberg

212-496-6828

Email: eiscom@msn.com

The following information was filed by Englobal Corp (ENG) on Thursday, November 4, 2021 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

Please wait while we load the requested 10-Q report or click the link below:

https://last10k.com/sec-filings/report/933738/000156827621002035/eng_10q.htm

View differences made from one quarter to another to evaluate Englobal Corp's financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ) — *Sample 10-K Year-over-Year (YoY) Comparison*

Compare this 10-Q Quarterly Report to its predecessor by reading our highlights to see what text and tables were ~~removed~~ , added and changed by Englobal Corp.

Continue

Assess how Englobal Corp's management team is paid from their Annual Proxy

Englobal Corp's Definitive Proxy Statement (Form DEF 14A) filed after their 2021 10-K Annual Report includes:

Voting Procedures
Board Members
Executive Team
Salaries, Bonuses, Perks
Peers / Competitors

Continue

Rating
Learn More

Filter Sentiment:

All

Positive

Negative

Filter Category:

All

Financial

Revenue

M & A

Other

Filter Subcategory:

All

Expense

Earnings

Product

Cash Flow

Other

Inside Englobal Corp's 10-Q Quarterly Report:

Financial - Expense Highlight
SG&A expenses increased by $3.3 million for the nine months ended September 25, 2021 as compared to the nine months ended September 26, 2020 primarily due to a bad debt reserve of $1.4 million recorded during the second quarter of 2021, an increase in salaries and burden expense of $1.4 million from our investment in key business development personnel, an increase of $0.1 million in recruiting expense, an increase in legal expense of $0.2 million, and an increase in accounting services expense of $0.1 million.

Other - Other Highlight
Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q, the specific risk factors identified under Part I, "Item 1A.
Other - Other Highlight
Forward-Looking Statements Certain information contained in this Quarterly Report on Form 10-Q, as well as other written and oral statements made or incorporated by reference from time to time by the Company and its representatives in other reports, filings with the Securities and Exchange Commission (the "SEC"), press releases, conferences or otherwise, may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act").
Financial - Earnings Highlight
Cash and the availability of cash could be materially restricted if (1) outstanding invoices billed are not collected or are not collected in a timely manner, (2) circumstances prevent the timely internal processing of invoices, (3) we lose one or more of our major customers or our major customers significantly reduce the amount of work requested from us, (4) we are unable to win new projects that we can perform on a profitable basis or (5) we are unable to reverse our use of cash to fund losses.
Financial - Earnings Highlight
Gross Profit - Gross profit margin decreased 21.0% to (13.7)% from 7.3% for the three months ended September 25, 2021 as compared to the three months ended September 26, 2020.
Financial - Earnings
Gross profit margin decreased 12.1%...Read more
Financial - Earnings
Additionally, the decrease in gross...Read more
Financial - Earnings
The decrease in gross profit...Read more
Financial - Earnings
The decrease in gross profit...Read more
Financial - Expense
We have made significant investments...Read more
Financial - Expense
Our interest expense decreased to...Read more
Revenue - Product
We recognize that the level...Read more
Other - Other
The primary drivers of our...Read more
Financial - Expense
Segment operating SG&A expense includes...Read more
Revenue - Product
On January 29, 2021, we...Read more
Other - Other
Risk Factors" in the Company's...Read more
Financial - Cash Flow
Cash Flows from Financing Activities...Read more
Revenue - Product
21 Revenue - Revenue decreased...Read more
Revenue - Product
Revenue decreased $23.4 million to...Read more
Other - Other
Results of Operations In the...Read more
Financial - Shares
In April 2021, 400,538 shares...Read more
M & A - Other
We continue to review strategic...Read more
M & A - Other
We continue to review strategic...Read more
Financial - Expense
Our interest expense increased to...Read more
Revenue - Product
While we have many potential...Read more

Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Material Contracts, Statements, Certifications & more

Englobal Corp provided additional information to their SEC Filing as exhibits

Exhibit 31.1: Certification

Exhibit 31.2: Certification

Exhibit 32.1: Certification

Ticker: ENG
CIK: 933738
Form Type: 10-Q Quarterly Report
Accession Number: 0001568276-21-002035
Submitted to the SEC: Thu Nov 04 2021 1:05:54 PM EST
Accepted by the SEC: Thu Nov 04 2021
Period: Saturday, September 25, 2021
Industry: Engineering Services